Commercial real estate execs eye multifamily, retail sectors for growth, says KPMG report

Propelled by increasing economic optimism, commercial real estate industry executives say geographic expansion will be a key focus over the coming year, according to a recent survey conducted by KPMG LLP, the audit, tax and advisory firm.

In the 2013 KPMG Commercial Real Estate Outlook Survey, 58 percent of executives said they expect their company to increase spending most on geographic expansion, up from 21 percent in last year’s survey and 11 percent from KPMG’s 2011 survey.

In the United States, executives most frequently cited the Southwest (45 percent) and the Northeast (36 percent) regions as the best commercial real estate investment opportunities. Latin America (32 percent) and Asia Pacific (21 percent) were identified as the top real estate investment opportunities outside of the United States.

“Market expansion is an important focus for commercial real estate executives as they strive to grow the top line,” said Greg Williams, national leader of KPMG LLP’s Real Estate practice. “Domestically, the Southwest and Northeast are attractive markets because they are experiencing higher job and economic growth and thus have experienced a faster recovery, with property prices in select sub-markets within these regions at or above pre-recession levels.”

Development Trends

When asked how much new development is expected to commence in the United States in 2014, multi-family was identified as the top sector with 43 percent of respondents expecting “a significant amount” to launch, down from 51 percent in last year’s survey which significantly outpaced other asset classes. Nineteen percent expect a significant amount of development in retail in 2014, up from five percent in last year’s survey, while 18 percent expect a significant amount of development in hospitality, up from seven percent in last year’s survey.

“Multi-family is still the darling, but all sectors are expected to see an increase in new development as access to financing has improved for these projects, and executives are more optimistic about the economy’s growth prospects,” said Williams.

Seventy-two percent of respondents expect the U.S. economy to either moderately or significantly improve over the next year, up from 58 percent in last year’s survey. Additionally, 84 percent said their companies’ revenue increased over the past year, while the same percentage expects it to increase next year as well.

Revenue Drivers

Acquisitions (53 percent), improving real estate fundamentals (44 percent), and geographic expansion (38 percent) were selected as the top three drivers for revenue growth of the respondents’ companies over the next three years. Class A assets in primary markets (48 percent) and development opportunities (25 percent) were identified by commercial real estate executives as the top assets they would be in the market to acquire in the next year.

“While some markets are still stabilizing post-recession, there’s a flight to safety and security, and class A assets in primary markets continue to be the surest bets,” said Phil Marra, Northeast leader of KPMG’s Real Estate practice. “In some cases, however, we are seeing fresh approaches, such as new REITs forming to address opportunities in the single-family-home rental market.”

Twenty-five percent of those surveyed said their organization is finding an ample supply of quality properties that can deliver a sufficient return at reasonable prices, with another 60 percent saying their organization is not able to find quality properties at reasonable prices.

“Given that pricing is critical to producing sufficient yields, executives are being very selective as the availability of distressed assets has slowed,” added Marra.

Pricing pressures (32 percent), lack of customer demand (30 percent), and regulatory and legislative pressure (24 percent) were cited as the most significant growth barriers over the next year.

Political and Regulatory Uncertainty

When asked to identify the issues posing the biggest threat to business models, 40 percent of executives indicated political and regulatory uncertainty as their top concern. Thirty-three percent of respondents said they did not know how evolving Federal tax policy would impact their organization’s business strategy, while 27 percent said it would decrease their capital investment. Additionally, 67 percent said that their company was only somewhat prepared to proactively manage the impact of public policy and regulatory changes.

“The political and regulatory environment continues to pose challenges and uncertainty,” said Williams. “To maximize their success, organizations should assess how potential regulations and tax policy changes will impact their businesses, and proactively manage those impacts.”

The KPMG Commercial Real Estate Outlook Survey

The KPMG survey was completed in spring of 2013 and reflects the responses of 100 senior executives in the commercial real estate industry. Based on revenue in the most recent fiscal year, 8 percent of respondents work for companies with annual revenues exceeding $10 billion, 36 percent with annual revenues in the $1 billion to $10 billion range, and 56 percent with revenues in the $100 million to $1 billion range.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.

Power consumption for data centers doubled from 2000 and 2006, and it is anticipated to double again by 2011, making these mission-critical facilities the nation's largest commercial user of electric power. With major technology companies investing heavily in new data centers, it's no wonder Building Teams see these mission-critical facilities as a golden opportunity, and why they are working hard to keep energy costs at data centers in check.

| Sep 13, 2010

3D Prototyping Goes Low-cost

Today’s less costly 3D color printers are attracting the attention of AEC firms looking to rapidly prototype designs and communicate design intent to clients.

| Aug 11, 2010

Cubellis principals reorganize as CI design

Former principals of Cubellis Inc. have formed ci design "with a stellar group of projects in the United States and internationally," states John Larsen who, with Richard Rankin and Christopher Ladd, is leading the architecture and planning firm.

| Aug 11, 2010

Leo A Daly changes name of STH, completes acquisition

LEO A DALY has changed the name of STH Architectural Group to the name of its parent company, Leo A Daly. STH was acquired in February 2009 as a strategic move to accelerate growth in its core business sectors and to strengthen the firm's presence in the Florida market.

| Aug 11, 2010

AIA hires Worthen, Fitzgerald for sustainability, young architects initiatives

As part of an ongoing effort to bolster its education and outreach on sustainability, the American Institute of Architects has hired William J. Worthen, AIA, LEED AP, vice president of Simon & Associates (a green consulting firm) as Director and Resource Architect for Sustainability. The AIA has also hired Kevin A. Fitzgerald, AIA, a former associate with Robert AM Stern Architects, as a staff coordinator/team leader for several AIA committees devoted to young architects.

| Aug 11, 2010

Perkins+Will acquires Canadian firm Shore Tilbe Irwin & Partners

Shore Tilbe Irwin & Partners of Toronto, Ont., Canada, has been acquired by Perkins+Will, a global integrated design firm headquartered in Chicago. The merger marks Perkins+Will's 19th office in North America and its second in Canada.

| Aug 11, 2010

January 2010 AIA CE exam: High-Performance Workplaces

| Aug 11, 2010

NBBJ and C.T. Hsu associates join forces for Florida healthcare market

NBBJ has entered into an exclusive alliance agreement with C.T. Hsu + Associates P.A. (CTHA) to provide world-class design/planning services for Florida's emerging healthcare and science facilities market. The alliance combines NBBJ's international reputation for the design and planning of healthcare and science & research facilities with CTHA's knowledge of community needs and established reputation for planning and design expertise in Central Florida.

Currently Reading

Commercial real estate execs eye multifamily, retail sectors for growth, says KPMG report

Tags

| Sep 13, 2010

| Sep 13, 2010

| Sep 13, 2010

| Sep 13, 2010

| Aug 11, 2010

| Aug 11, 2010

| Aug 11, 2010

| Aug 11, 2010

| Aug 11, 2010

| Aug 11, 2010

Most Popular Content

Magazine Subscription

Get our Newsletters

Follow BD+C: